Thursday, December 31, 2009

What happened during the last hour today? Is someone afraid a pack of pigs are to be slaughtered starting the New Year?

Maybe. (Yet judging by the extreme sell-side depth to which RSI fell, any additional weakness might be short lived.)

It seems if slaughter were likely to kick off the New Year, the entire month of December would have been a lot dicier than it has been. Then again, those among a razor-thin minority wise to the probability equity lives on borrowed time (literally) apparently are taking every minute they're given to drip their holdings to a marginal element that, by hook or crook, more or less are forced to buy.

"Hook" via secondary offerings of issues with significant representation in popular ETFs.

"Crook" via everything the Fed and Treasury are doing to depress the dollar and make U.S. risk assets relatively more attractive to foreigner investors.

All indications continue suggesting growing weakness, both fundamentally and technically. If back in late-June (when the possibility of further advance off March bottom was thought a real, yet more or less meaningless prospect) I had strongly believed the rally's continuation would last as long as it has, I might not have been so sanguine about holding bearish ETF positions. With both fundamental and technical circumstances supporting belief the market could finish negative on the year there was good reason not to over-trade my position.

Well, the wait is proved grueling, no doubt. Yet wisdom suggests it will all work out to my gain because in my experience there has never been a more appropriate moment to be risk averse. If anything, I am guilty of understating the threat most investors face.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Wednesday, December 30, 2009

Check out this article revealing, "That longtime 'perma-bear' Jim Grant had turned bull late this summer was one of the year's big surprises" ... saying, "He wasn't early to the rally by any means, but his public conversion didn't 'ring the bell at the top' as some had assumed."

This plays right into my view supposing that, sometime over the next couple years major stock indexes could collapse back to levels last seen in the 1987-1994 period, minimally. Indeed, once this collapse in fact happens (as I remain convinced it most probably will), then for all practical intents and purposes Mr. Grant as "perma-bear" will in fact have rung the bell signaling "top." You need but consider his recent crossover into the bull camp from perspective covering that longer-term period (around 30 years!) during which Grant had been decidedly bearish.

It is Grant's belief that "the economy is basically a bouncing ball, which flies off the cement at roughly the same velocity it hit." So, seeing as we are a finance-dominated "economy," a reasonable facsimile of this "bouncing ball" might be presented via the S&P 500.

Now, truth of the matter is there presently are a wealth of reasons to suppose this bouncing ball is traveling on a descending path. Indeed, all one need consider is the fact that, during the October 2007 - March 2009 decline internal technical conditions markedly worsened relative to the previous S&P 500 decline covering roughly the same distance from 2000 - 2002.

Thus, absent any evidence suggesting longer-term technical conditions are improving — quite the contrary! — the case supporting distribution from strong hands to weak occurring over the duration of the market's counter-trend rally off March '09 bottom is made. Any "perma-bear" turning bullish at this time is but icing on the cake.

So, with this in mind consider the present position of the bouncing ball's trajectory as being similar to where things stood in May 2008 ... with gravity formed by profound financial system vulnerability presenting that natural force threatening to throttle the stock market much, much lower.

"Stocks have reached what looks like a permanently high plateau."—Irving Fisher, Professor of Economics, Yale University, 1929.

"Cause for optimism is an observation about human nature, summed up by an epigram ... borrowed from the late British economist Arthur C. Pigou: 'The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born not an infant, but a giant.'”—James Grant, Economist, December 2009

You might be wondering, what makes Grant's remark no different than Fisher's?

Well, James Grant (of all people!) presently is optimistic. So evidently, the crisis has yet to have its killing effect. You see this everywhere, too...

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Tuesday, December 29, 2009

Wonder in prose considering a like-from-like possibility noted in green and red below...

The eagle shot on high still soars among swarming supportHolding health's appearance even to a 1990 likenessWhile power fades imagination to wonder howSuch greater supporting swarms could bring history's repeatAlthough, right there, undeniable evidence meets the eyeIndeed, showing the supporting swarm has been grown beforeAnd so, with nothing then or now set in stoneDare I say the swarm couldn't grow still more?

(The "swarm" is seen in the volume of shares exchanged.)

I read the top 5% of households own no less than 84% of U.S. equity...

What small interest(!) can move things was my first thought. Next was what sizable interest can hold things up. And, likewise, what concentrated interest are the largest sharks.

Hence my continued interest in The Great NASDAQ Head and Shoulders Top (noted by the blue line drawn above) ... made all the more curious by RSI's position in buy- and sell-side balance at this very moment when, as is typical, NASDAQ has retraced back to the "neckline" following last October's high volume break below it.

Unless proven otherwise the Great NASDAQ head and shoulders top is mine. I own it. So, just remember this when $COMPQ trades at 300, the minimal price objective suggested by this head and shoulders top whose form most critically is substantiated by accompanying volume during its formation.

(And may posterity note for the record my prudence not claiming ownership until such time as a normal reaction to the neckline was nearly completed! Yet, too, were recovery to continue and carry $COMPQ above the neckline, then my "nothing set in stone" message above will require further consideration, let alone my bearish position in UltraShort ETFs.)

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Monday, December 28, 2009

According to CNBC Fast Money trader Steve Grasso, "Tech still is the sweetheart of the market."

More like whore, Grasso ... the kind whose appearances captivate greedy suckers who become so enamored with the game they dare not imagine that, under the covers lie more diseases than the Surgeon General can cure.

Truth is NASDAQ remains sick as a dog — its underlying condition still signaling pending doom. There is no need to beat this dead animal. It is just about over for tech.

Rather, let's go to a place really worth getting lathered up about...

Is anyone else mystified by how little analysis in our pliant, accommodating financial press followed Treasury's after market bombshell on December 24th? This sort of surprise announcement came along lines anticipated a few days ago while looking forward to two holiday shortened weeks to close out 2009. Dubai World's insolvency announced after hours, the day before Thanksgiving, raised this possibility. Then bam, tiny Tim, our nation's mentally crippled Treasury Secretary served up a Christmas turkey.

It is hard to imagine a more politically insensitive action. There surely is more to Treasury's decision than meets the eye. Without a doubt, the policy turn and the backhanded manner in which this was announced plainly reveals just how terribly fragile is confidence. Glass in a category 5 hurricane might have a better chance remaining intact. Something isn't right.

Are we on the verge of collapsing in a hyperinflationary blowout? Is the U.S. dollar about to come under attack?

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Wednesday, December 23, 2009

Might as well look at trend leader NASDAQ, eh? Ever so slightly higher she goes...

All appearances of strength notwithstanding, technical deterioration coinciding with fourth waves relative to second waves has occurred every step of the way higher off March bottom. This presents an objective condition confirming the view that, five waves are unfolding off March bottom.

These five waves are seen forming wave C of an A-B-C Elliott corrective wave developing since November 2008 bottom. Indeed, that "all appearances of strength" exist at all at this point (following last year's throttling) is more fitting a C wave (an Elliott third wave) than were any first wave contrarily thought forming off March bottom. Resilience seen in both the ongoing advance's longevity as well as its coinciding RSI and MACD remaining decidedly to the buy-side of respective ranges objectively quantifies such "appearances of strength" as lend weight to this probability.

Now, Elliott corrective wave iv of 5 [of C of (B)] could in fact extend out to last Thursday's low (12.17.09) instead of ending where labeled above. Thus, wave v of 5 (finally leading to top) could extend $COMPQ a bit higher still (yet in the process remain shorter than wave iii of 5 ... as it must were the wave count above correct).

Judging by RSI and MACD the end of NASDAQ's advance off March bottom draws near ... much as has been the case for quite some time now. Yes, no doubt, this levitation has extended a bit longer than I thought likely. Yet this is neither of any great consequence — fearsome, position-wise, or analytically perplexing — nor is this levitation's duration any great surprise — indeed it is far more fitting than it is the least bit astonishing.

Could I have better expected it?

What's the difference when there is objective confirmation that, in the end these past few months spent in extended levitation won't matter one bit? (Indeed, I thought much the same back in early July when extension of this advance off March bottom appeared a reasonable possibility.)

Could I have better profited, particularly considering the distance traveled, indeed, was, remarkably, something I anticipated?

Uh, yeah.

Do I regret this?

You want to know the truth? It's too early to tell (but I doubt I will)...

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Tuesday, December 22, 2009

Is it safe to say that, never before in the lifetime of anyone presently living has there been such limited physical capacity to efficiently service those myriad financial claims facilitating leverage?

Was not last year's extraordinary experience a consequence of this reality? Indeed! So, then, what of growing vulnerability born of excessive leverage has changed?

Both nothing and everything!

Nothing ... because physical economy is a slow-moving ship. Such added capacity as naturally reduces leverage is not easily ramped up. This in fact is an endeavor that takes time, as well as a great deal of capital-intensive investment which must be directed toward building up the stock of productivity-enhancing assets.

Everything ... because Treasury plainly recognizes that, by remaining in the confines of the present dynamic there is only so much it can do. Namely, it can buy time. And this it did. Thus, when talk of "success" averting collapse is heard, think only in these terms.

As I have been suggesting, it appears Treasury recognizes time has run out. No one else seems to be acknowledging this. Yet TARP was repaid for a reason and "all is well" was not it! Contrarily, there is every reason to believe we are on the verge of global financial collapse whose impact threatens even the U.S. Treasury.

If never before in the lifetime of anyone presently living has there been such limited physical capacity to efficiently service those myriad financial claims facilitating leverage, then the consequence of this reality could destroy the world as we know it in a virtual instant.

And what condition would most effectively raise the probability of sudden collapse?

Well, how about an irreversible loss of confidence? When in the lifetime of anyone presently living was there ever such open acknowledgment of risk at the very core of global arrangements — where solvency of sovereign debt issued by such nations as the United States and the United Kingdom was being called into question?

Some might say a similar crisis occurred in the late-1960s and early-1970s. However, there is one big difference now. Formerly developed nations have become post-industrial scrap heaps, no longer self-sufficient, making up for physical deficits by imposing a sort of neo-colonial capitalism upon the globe.

Globalization certainly requires capacity to enforce this altered arrangement. Yet recent failure in Copenhagen, attempting to accelerate the build out of a global carbon casino, suggests enforcement capacity is waning. This, too, has bearing on confidence in the viability of a grotesquely leveraged, global financial system.

This issue of confidence is raised tonight with reminder of a memorable recent instance when its evaporation literally changed the world in a mere matter of days...

Remember Bear Stearns? There is every reason to fear a repeat ... but on a much larger scale.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Monday, December 21, 2009

You don't need me to tell you what is going on. It is as plain as day...

Ask yourself one question: where is the follow-through? Jam pre-market futures higher, then distribute. Pretty simple. It has been this way for months now. Today's experience is nothing new.

But what of this contrived, CME-led bid absent any follow-through? What does it prove?

Zero real buying power possessing capacity to sustain a ruse!

So, when might this become a problem?

When some presently bankrupt enterprise, public or private, finally rolls over and dies.

Picture it...

A crisis of confidence. Day after day, pre-market futures obscenely sold down. Circuit breakers rapidly triggered once stock exchanges open for trading. The impact of some dead enterprise's seizure. A chain reaction collapse that simply cannot be averted. No bids to be found. Millions stuck with positions being driven only further into the ground.

Such likelihood is the price of complacency among those who today insist upon holding their position in expectation of recovering a few more pennies following last year's pounding.

Market makers crippled last year are well-aware of profound risk still nowhere near abating. Ditto the exchanges where these firms do business. These insiders are not dumb! Yet because they have no other choice they're playing millions who are. Don't you be one.

If trend-leading NASDAQ's cumulative advance-decline line has returned to its death spiral ... then $COMPQ 300 ... here we come.

No, no, no! When new index highs are reached, more stocks should be setting new 52-week highs, not fewer. Simple stuff! Apparently, however, too much rigor for some.

Look. These past couple months present every appearance that, fattened pigs are ready for slaughter. Not once have market makers let things slip, and likely for a reason. Namely, they can't afford to. That is why once circumstance moves beyond their capacity to control, this thing probably is going to spiral into oblivion so quickly there simply will be no time to react.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Friday, December 18, 2009

Team Fraud is screwed. Continued hyperinflationary bailout of a technically insolvent banking system (built with help from an ever-accommodating Greenspan-Bernanke Federal Reserve) is fast reaching a point where new stresses cannot be met with copious loads of helicopter money without profound negative impact.

So, with the lender of last resort all in a globally connected Ponzi scheme has reached a point of discontinuity wherein but two possibilities exist: systemic seizure or monetary tsunami. Both portend a profound acceleration in the collapse of the normal relationship between finance and the physical economy.

The U.S. Treasury, not being blind to this, is booting from its trough (i.e. TARP) those banking enterprises whose foreign creditors cannot prospectively soon overwhelm American credibility. Thus, too, today's meager banking equity support operation should be seen for what it is: little more than an act of putting lipstick on a pig. It cannot possibly last. CNBC's Shemp Monkey cannot beat his crazy drum with the insane stick long enough to keep Citigroup from collapsing.

The real pigs — FNM, FRE, AIG, GMAC — remain basket cases still in need of life support. These lie at the epicenter where the issue of solvency of U.S. Treasury debt is raised. Their vulnerability fast is becoming THE issue affecting dollar index and gold probabilities mentioned yesterday.

Look over any chart typically presented here. Do you see any technical improvement? Anywhere? So, beware an imminent abandonment of financial assets whose continued viability absolutely requires unending bailout! Treasury is acting as though it is about to come under attack.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Thursday, December 17, 2009

"Fannie Mae recently warned, for example, that it could not pay the dividends it owes the Treasury, so 'future dividend payments will be effectively funded with equity drawn from the Treasury.'"— "4 Big Mortgage Backers Swim in Ocean of Debt" NY Times, 12/16/09

What's that I smell? Is it ... is it ... sovereign default?

The fact traders are concerned about the risk of a squeeze cascading in the Euro zone is unusual enough to be ... alarming. We may be at an inflection point.

Oddly enough, the dollar index, technically speaking, appears much like it did in '07 when but the beginning of the global financial system's brewing sorrows was gaining recognition. Then, too, the index would bounce like it has over recent days ... only to get knocked lower.

Construction on a global carbon casino is being halted in Copenhagen. This might have been the last chance at peacefully continuing status quo arrangements of the past couple generations. Backs to the wall — no ruse remaining to mask insolvency — a bankrupt aristocracy has no choice but turn on itself in shark-on-shark action.

Given a foreboding configuration of things, a stunning kickoff event in a dire endgame — something precipitous, yet passed off as an "overreaction" and subsequently leading to recovery — is a possibility that has been building for quite some time now. Absolutely nothing diminishes this likelihood.

Granted, the prospect of an imminent, deep swoon should be regarded little more than a "gut feeling," despite being reasonable from a technical perspective. Yet I throw it out there because talk of "recovery" becoming fashionable these days is so ridiculously out of touch with reality that, the financial world turns by "inflate or die" ... and there presently is far more at risk of dying than finds power to further inflate.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Wednesday, December 16, 2009

The reason TARP loans suddenly are being repaid via a mass wave of secondary offerings coming rapid fire has nothing to do with technically insolvent financial institutions wanting to get out from underneath the government's thumb.

It has nothing to do with contrived issues involving government restrictions on compensation affecting a firm's capacity to retain "talent."

And it absolutely has nothing to do with improving business conditions in the banking industry, making massive equity dilution a palatable price to pay for burying past mistakes, while putting firms in position to profit from new opportunities on the horizon.

You see, here we are at year end and there's still no sign from NASA's Martian rovers of benevolent life on Mars willing to back the U.S. Treasury. If you've been paying attention to events in Europe and the Middle East, then you know concern for sovereign debt solvency is gaining critical mass, as attacks on nation states are increasing rapidly.

Oh, and uh, when did this grave exposure to sovereign debt default suddenly rear its ugly head? Wasn't it the evening of November 25th, 2009 — a Wednesday — the day before Thanksgiving?

Well, Christmas is coming ... and then New Years. Both occur on Fridays this year. That's a pair of long weekends ... giving some prospective, "unforeseen" shock an extra day to be absorbed.

On one hand, you might say TARP repayment is an act divorcing hopelessly insolvent banking institutions from the U.S. Treasury, leaving these enterprises twisting in the wind. Then, on the other hand, the call for restoration of Glass-Steagall might be seen a signal saying y'all work out this problem on the mean streets you've created ... hang yourself with the rope you've been given over the years by the Congress, which in fact came at your request ... and if things don't work out, well, it'll just have to be bankruptcy reorganization, come what may.

Maybe this week's White House meeting with banking industry executives involved something more than just calling on banks to increase lending. Maybe there was some frightening "or else" attached to the call — say, something involving the Justice Department.

So, now we are left to wonder what happens when this monster has no means of satisfying his hunger via some magic trick (structured finance) or extortion (such as brought TARP into existence)? Well, what happened last year? Ah yes, the stock market was hit.

Drum roll...

The Senate Banking Committee vote on king dollar wrecker, Ben Bernanke, is tomorrow.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Monday, December 14, 2009

Well, first it appears the fundamental backdrop is one saturated with complacency. This has made for moments over the past 4+ months wherein stocks, after having begun to fall of their own weight and subsequently goosed via well-orchestrated, CME-driven short squeezes (occurring at the open of trading in particular), could be made to seem still attractive, thereby detracting any pressing concern about the viability of the market's advance off March bottom.

Over recent weeks, however, there appears some difficulty in generating any kind of meaningful follow-through to these attempts at keeping the market levitated. Indeed, the tendency causing stocks to begin falling of their own weight appears to be setting in ever sooner. The task of feeding such complacency as is restraining any concerted wave of selling apparently is becoming more difficult.

On one hand, this stands to reason given how far the market's counter-trend rally off March bottom has come. Surely, there is good reason among the bullish camp simply to wait for a pullback before allocating fresh capital to stocks, and that is why it is becoming more difficult to draw in new money and drive the market decidedly higher.

Yet on the other hand, it appears any meaningful pullback is being purposely forestalled. Trading off late-October's bottom most emphatically reveals this. Nevertheless, that the bulk of the market's subsequent advance occurred on notably light volume speaks of an entirely contrived move that came about more or less because complacency (which is not to be confused with fearlessness) is holding in check any concerted wave of selling.

So, what could this dynamic be revealing about likely prospects? Quite simply, the probability of sudden, spectacular collapse is being raised. Considering abundant evidence demonstrating the market has not been climbing the proverbial wall of worry, there is every reason to believe that, once further attempts to squeeze prices higher are definitively proven futile (much as is now becoming evident), the market likely will crater rapidly in a self-feeding downward spiral.

Were the fifth wave of wave C off March bottom forming a rising wedge (tentatively delineated above with green lines), the likelihood of spectacular collapse would find technical basis in the realm of Elliott Wave analysis, as a rising wedge, once completed, typically results in rapid return of gains made during its unfolding.

One thing here is certain. Underlying technical weakness continues building. Yeah, yeah, yeah, but indexes keep rising, you say. Again, though, this condition likewise substantiates an increasing probability of spectacular collapse kicking off the market's anticipated decline slated to take major indexes much, much lower than was reached in March.

Hat tip to those hopelessly insolvent, major banking institutions floating massive secondary offerings, as well as the New York Stock Exchange whose short-sightedness allows this. Today, these bodies are making it incredibly easy for anyone with eyes and a functioning brain cell to realize equity is toilet paper ... trash ... DEAD MONEY.

Something else to think about, too...

If this is how shareholders are treated, how much less concern could there be for depositors?

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Friday, December 11, 2009

Let's take a quick look at the inappropriately leading, mega-cap, Dow Jones Industrials Average. This group's leadership is, in fact, good indication the stock market at large is a barnyard of pigs waiting to be slaughtered.

Look, just ask yourself... How is globalization going to hold up as restricted finance alters the functioning of the physical landscape? Collapse already is occurring. Trade remains depressed. Sovereign nations threaten default unless somehow either bailed out or gutted. It — globalization — is all over but for the shouting (and there should be a bunch of that coming, too, no matter which way the sovereign debt problem is dealt with).

So, those leading corporate beneficiaries of globalization whose abusive perpetuation of an historic divide between haves and have nots, themselves, are likely to be abused in kind. Hey, what goes around, comes around. The faulty model under which top tier public companies operate, indeed, assures this.

And since thousands of other companies beyond core globalization junkies exist in a climate where all have become accustomed to chasing crumbs falling from a shrinking pie (that simply no longer is being subsidized with copious loads of cheap credit dished out as though it were ice cream), these too will suffer even more than has already been the case over the past ten years. NASDAQ's lag really is no mystery. Thus, going along to get along shall be further demonstrated a poor way to run a business, literally. Again, what goes around, will keep coming around until globalization as we know it is put to an end.

As noted previously, the Dow Industrials' advance following July's monster short squeeze is unfolding in a manner different from other major indexes. Is possibly an expanding triangle forming in the fourth wave position of five waves up from March bottom? If so, look for RSI and MACD readings to fall below respective early-July lows as the Industrials pull back and complete this prospective Elliott Wave corrective form.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Thursday, December 10, 2009

No solid case against equity can be diminished by modest delay in the bear's reemergence. Indeed, many months more could pass before any doubt at all might be raised about the likely fate generally awaiting common stocks. At the moment not one shred of objective evidence diminishes the probability the stock market stands at great risk of collapsing.

I haven’t liked the stock market. I can’t tell with any certainty at this time, butthis bear market rally could be in the process of topping out. If it is, I think we’rein for a vicious collapse. Remember, rallies in a primary bear market aremovements against the main force or tide of the market. In other words,during a rally, the bear forces have been held back. When a bear market rallybreaks up, the market tends to make up for lost time. That means the declinestend to be rapid, violent and vicious. As I said, I can’t tell with certaintywhether the advance from the March low is breathing its last. But if it is —watch out; it’s not going to be pretty.

Yep.

The fact of the matter is nothing yet has developed challenging a technically-grounded view recognizing how over the past decade equity is being distributed from strong hands to weak.

Listen, if what the likes of BAC pulled this week (and what the likes of C and WFC are proposing) does not further confirm truth about an ongoing distribution, then there never was risk investing in equities. The operative word here is risk.

Clearly, BAC's record secondary offering is transferring risk from strong hands (the U.S. Treasury) to weak (equity funds). Given [still fundamentally fragile] circumstances, that is quite a leap.

Such reality plainly reveals a trading environment that's largely technically driven. The big banks — insolvent many times over — simply are taking advantage of structural arrangements in a manner much like strong hands on the NYSE have been doing since 1998 through promotion of wildly popular ETFs.

Yet underlying this trend facilitating distribution remains a fundamental condition foremost conducive to fraud and chaos. How this fact which over recent years has been made all too plain is lost in our contemporary culture of greed!

Then again, though, a short-sighted mindset has for decades become ingrained among an investor class crowded with players who simply cannot fathom the possibility of collapse. How does the saying go? Fool me once, shame on you; fool me twice, shame on me!

How few there are who apparently learned a thing from last year's experience...

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Wednesday, December 09, 2009

One need not look hard to uncover a wealth of technical evidence supporting a negative outlook toward the stock market and justifying a cautious stand decidedly risk averse. A wise move, too, because let's face it, all kind of fantasy is being dreamed up as the broad market levitates, with the crap growing so thick that, large banks, insolvent many times over, are able to get away with what effectively amounts to authorship of a new book for dummies: OUTRIGHT FRAUD!

Market peaks in October and November coincided with a successively diminishing percentage of NYSE-listed issues bullishly postured. At last a divergence in this technical measure! By no means, however, is this a "first sign" of trouble presented here.

Given the absolute extreme the NYSE Bullish Percent Index reached there are a couple takeaways...

First, a global financial system at the brink of collapse, rescued by the lender of last resort in a flood of liquidity, does not justify bullish prospects for 85% of NYSE-listed issues. This rather smacks of unjustified complacency — indeed, irrational exuberance.

Which leads to the second takeaway...

Technical conditions during formation of an Elliott 2nd wave (or b wave) often better conditions before the 1st wave unfolded. What you see above is a demonstration of this. Thus, we have confirmation of a view claiming the stock market's advance off March '09 bottom is but a counter-trend rally in a larger corrective wave [down] that began in October 2007.

Added confirmation is given by the same measure on NASDAQ-listed issues...

The trend-leading NASDAQ — whose acid test reveals the presence of animal spirits necessary to sustain a broad-based advance — finds its underlying technical condition in absolute terms lagging the NYSE. Thus, with a smaller percentage of NASDAQ-listed issues bullishly postured we find animal spirits rather more subdued. Were the advance off March '09 bottom thought likely to persist indefinitely animal spirits should be growing wilder. Yet precisely the opposite is happening. This, broadly speaking, is decidedly bearish.

In relative terms the picture presented on NASDAQ appears mixed, at least at first glance. Yet the overall message conveyed is conclusively bearish, much like the case on the NYSE.

Most obvious is the fact that, the percentage of bullishly postured, NASDAQ-listed issues has fallen below its 200-day moving average, as well as its low set in July. On both these counts, then, the trend-leading NASDAQ is seen pointing the way lower.

Much like the NYSE Bullish Percent Index, the NASDAQ Bullish Percent Index blew out its peak in '07. Thus, the same "irrational exuberance" can be seen here, too. This conclusion is furthered by the fact the NASDAQ BPI's 200-day moving average is besting the peak it reached in 2007.

Yet NASDAQ's lag versus the NYSE also is seen by its BPI's 200-day moving average trailing in absolute terms the same on the NYSE. Again, were animal spirits present this in all probability would not be the case. Further confirmed by this, then, is probability the market's advance off March '09 bottom is but a counter-trend rally in a larger correction, rather than the start of a new bull market.

One final note...

Chances are elevated prospects for an imminent, spectacular market collapse await a turning down of respective 200-day moving averages for both NYSE and NASDAQ Bullish Percent Indexes, much as occurred in the latter half of 2007. So, keep an eye out for this because the market's present levitation is likely to result in a decided move lower as a consequence of fewer issues supporting respective composite indexes at slightly higher levels reached over recent weeks and months.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.

Be Strong

Matthew 24:13

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